Credit Suisse: The big Swiss bank can still save that | money

Panic in the financial markets!

It is currently THE horror story in the financial market: the share price of the Swiss bank Credit Suisse (CS) has plummeted in recent days, also taking other major banks such as the French BNP Paribas.

Fears of another banking earthquake are spreading, rumors are cornering the ailing major Swiss bank. Will a similar disaster repeat itself 14 years after Lehman’s bankruptcy?

How bad is the couch? BILD answers the most important questions.

Market capitalization plummeted by 80 percent

Since the beginning of 2018, the share price has fallen by 80 percent. If the bank, which now has about 50,000 employees, had a market value of 45 billion francs in 2017, today, after a low last week, that is only about ten billion francs (about 10.31 billion euros). ).

Scandals cost trust

Above all, the bank gambles away on much of its most valuable asset: trust.

In 2019, the bank was outraged by a spy affair. She had a renegade employee chased down the street, fearing he would steal lucrative customers. Then in 2021 the problems of the financial conglomerate Greensill and the collapse of the US hedge fund Archegos sent the bank into the red.

Convictions followed for a corruption scandal in Mozambique, when the bank failed to stop money laundering by a Bulgarian mafia, and for fraud by an employee in Bermuda. The bank is still defending itself against some. In addition, there were negative headlines this year about possible accounts of criminals and corrupt heads of state at Credit Suisse.

Credit Suisse can still save that

Anke Reingen, an analyst at investment bank RBC Capital Markets, writes in a study: “CS must act decisively to stabilize its business, regain its credibility and improve its returns.”

But how should that work? With fresh capital: four to six billion francs (4.12 to 6.18 billion euros).

And there is another problem: in the current environment of high inflation and the threat of a recession, it is extremely difficult to get fresh capital.

According to RBC analysts Reingen, the bank has three options:

▶︎ Capital increase: One way to get the billions is to issue new shares. The shares of the existing shareholders, however, would dilute considerably and have had to take a loss of hefty 60 percent since the beginning of the year.

▶︎ Renovation under own power: Some of the investment bank’s risky businesses require Credit Suisse to deposit a large amount of equity due to regulatory requirements. This serves as security. Now, if you scale back these deals or get out of them altogether, the freed-up capital can be used.

► Sale of shares – the third option, according to RBC analyst Reingen.

It is already clear that Credit Suisse’s restructuring will fail unless assets are sold. RBC expects the bank to sell a 40 percent minority stake to an outside investor. The profit for the big Swiss bank: just over a billion francs.

The problem, however, is that it will likely be difficult to find buyers for parts of the investment banking business that also pay a good price.

On Friday, the bank tried to get some air. She announced the repurchase of debt securities. The signal: first, you have the necessary resources – three billion francs – and you think the prices of the newspapers are too low.

Is another Lehman Brothers crash really imminent?

Credit Suisse investors and customers are nervous. Can the bank get healthy again? Is there a risk of bankruptcy like Lehman Brothers? “Due to the spiral of rumours, corrections and scandals, the bank is increasingly entering a vicious circle,” wrote the Neue Zürcher Zeitung.

The rating agency S&P initially stuck to its credit ratings for Credit Suisse but, given the global economic situation and turbulence in capital markets, saw “increasing risks” to the operational turnaround.

The question is whether there is a threat from a second Lehman Brothers. While on the one hand Top economists expect another earthquake at banks (BILD reported), many analysts find the Lehman equation unfounded: Credit Suisse is in trouble, “but it’s not a Lehman moment,” US financial market service Seeking Alpha wrote.

Other analysts also do not believe that Credit Suisse could pull the financial markets into a downward spiral as Lehman Brothers once did. “During the financial crisis, there were very different rules in terms of capital and liquidity,” said Andreas Venditti, banking analyst at Bank Vontobel, in the Swiss SRF television program “10 vor 10”. “Banks in general and Credit Suisse are in a much better position than the institutions during the financial crisis.” Among other things, they must have more equity than then and an emergency plan for financial difficulties.

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